Having low or no down payment mortgage options offers first time homebuyers and repeat homebuyers a better opportunity to get the home of their dreams. Some potential homebuyers think that they have to save at least 20% for a down payment, but that is not always the case. There are many loan programs that make buying a home possible before saving an initial 20%. Take advantage of the low rates now!
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The “20% down” idea for every mortgage comes from the most common loan, the Conventional fixed-rate mortgage loan. Putting 20% or more down on your home means private mortgage insurance (PMI) is not required. PMI protects the lender if you stop making payments on your loan and is required if the loan-to-value (LTV) percentage exceeds 80%. The larger the down payment you make, the smaller the loan amount will be and, therefore, the smaller your monthly payment will be. But if you drain all of your savings for a down payment, you won’t have a ton of money to work with if any emergencies arise. Therefore, a loan program with a small down payment may be your best option financially.
The FHA loan is a first time homebuyer favorite with its liberal income and credit score requirements and low down payment options. Depending on your financial situation, you could put down as little as 3.5%* of your new home’s value. FHA loans do, however, require you pay FHA mortgage insurance, but you may be able to refinance your mortgage and with a new mortgage that does not have mortgage insurance if the value of the home increases or you reduce the amount of principal needed for your mortgage.
USDA loans are designed to help improve the quality of life and economy in rural America. The USDA loan program has the potential for no or low down payment depending on your household income, credit score and the home’s value.
The VA Loan is a loan program offered to active U.S. service members, veterans and their surviving spouses with no required down payment. Homebuyers who have spent at least 6 years in the Reserves or National Guard may be eligible, as well as spouses of service members who’ve died in the line of duty. Eligibility is determined by act of Congress, but your vLoan mortgage advisor can help you find out if you are eligible.
If you are not sure what is best for your unique financial situation, make sure you talk with your loan officer and they will steer you down the right path.
If you are currently house hunting or looking to refinance during the holidays season, get a free rate quote to estimate your monthly payments and connect with one of our dedicated mortgage advisors. Don’t do mortgages like your parents did. Do it digitally, with vLoan. Follow @vLoanMortgage on Facebook, Twitter or Instagram to keep up to date with our monthly campaign #HomeForTheHolidays.